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It has been over a year since US President Donald Trump introduced his Liberation Day tariffs,<\/span><\/a> and Singapore made it through in better shape than expected.\u00a0<\/p>\n The economy grew 5 per cent in 2025<\/span><\/a>, far above the downgraded 0 per cent to 2 per cent projections from the Ministry of Trade and Industry post-Liberation Day.\u00a0 Exports surprised on the upside. Electronics and semiconductor-related demand stayed strong. There were no broad-based job losses.\u00a0<\/p>\n But that was the easy part.\u00a0<\/p>\n After the US Supreme Court ruled in February that the President lacked authority to impose the Liberation Day tariffs<\/span><\/a> under emergency powers, markets briefly hoped Washington would pull back. Instead, the US administration switched tools.\u00a0<\/p>\n They announced a temporary 10 per cent import surcharge under Section 122 that Mr Trump has threatened to raise to 15 per cent.\u00a0 More importantly, they doubled down on imposing tariffs under Sections 232 and 301.\u00a0<\/p>\n Section 232 allows the US to tariff entire product categories on \u201cnational security\u201d grounds \u2013 from semiconductors and electronics to pharmaceuticals and industrial inputs. Meanwhile, Section 301 allows the US to impose tariffs on countries deemed to be engaging in unfair trade practices.<\/p>\n These are more insidious because, unlike Section 122 tariffs that are time-bound, these statutes embed trade restrictions into domestic US law. They widen the scope from countries to sectors and practices \u2013 making tariffs more durable, selective and harder to negotiate away.<\/p>\n It speaks to a hardening in the US administration\u2019s stance \u2013 an attempt to make tariff and trade restrictions a wide-ranging and permanent tool to pull production and supply chains home, reduce trade deficits and extract leverage from trade partners.\u00a0<\/p>\n For Singapore, a small, trade-dependent economy, the danger is not just the tariff rates. It is the heightened business costs that come with operating uncertainty.\u00a0<\/p>\n Firms cannot assume that conditions for access to critical export markets will hold through the life of an investment. Suppliers build buffers and contingency clauses into contract terms, and buyers seek alternative sources \u201cjust in case\u201d. Investment committees apply higher hurdle rates that lead to decision paralysis or demand contingency plans that eventually shift production closer to end-markets.<\/p>\n Long before the actual tariffs hit Singapore, the US weaponisation of Section 232 and Section 301 could inflict pain on the Republic\u2019s economy by redirecting investment and supply chains. It also raises real concerns about Singapore\u2019s value as an investment destination and status as a trusted trading hub.\u00a0<\/p>\n Section 232 has implications for Singapore, given that pharmaceuticals and electronics, especially semiconductors, account for about half of Singapore\u2019s manufacturing output and around 40 per cent of its exports to the US.<\/p>\n So far, the near-term trade hit has been limited for Singapore. The first phase of semiconductor measures announced in January imposed a 25 per cent tariff on a narrow set of advanced AI chips that are not manufactured here. But a broader review due later in 2026 could widen the coverage.\u00a0<\/p>\n Singapore is also cushioned by the wider AI chip boom. Much of Singapore\u2019s semiconductor exports are the logic, memory and speciality chips that sit upstream and downstream of AI systems. Integrated circuits exports rose by about 16 per cent<\/span><\/a> in 2025, and a significant share of our chip shipments end in US data centres.\u00a0<\/p>\n If tariffs extend beyond the top-end accelerators to mainstream AI-related semiconductors, they will hit a core manufacturing export engine.<\/p>\n As for pharmaceuticals, the administration announced tariffs on April 2 of up to 100 per cent on patented pharmaceutical products and related ingredients, due to take effect from July 31.<\/p>\n In the same way, the impact so far has been limited. Many pharmaceutical plants here serve global \u2013 not US-only \u2013 demand. Some of our output, including generics, biosimilars and certain speciality products, is exempt. Several multinationals already have US production or expansion plans that may qualify their exports here for lower interim tariff rates.<\/p>\n But there is more at stake.\u00a0<\/p>\n Together, the pharmaceutical and electronics sectors employ more than 44,000 skilled workers and underpin our R&D and industrial base. They are also where many major US firms have placed big bets here \u2013 from GlobalFoundries, Micron and Applied Materials to Pfizer, Amgen and MSD.<\/p>\n Section 232 tilts future investment decisions \u2013 drug launches, fab expansions and advanced biologics lines \u2013 into the tariff wall.\u00a0<\/p>\n Existing plants will not disappear overnight. But the next wave of investment could go elsewhere. Over time, ancillary activities \u2013 suppliers, engineers, process innovation \u2013 follow the new investments.\u00a0<\/p>\n We have seen this before in other sectors, from the disk drive manufacturing industry in Singapore in the 1980s and 1990s, to consumer electronics in China following the US imposition of Section 301 tariffs there.\u00a0<\/p>\n Research from the International Monetary Fund, Bank for International Settlements and United Nations Economic and Social Commission for Asia and the Pacific has shown that tariffs and trade policy uncertainty persistently depress investment, lengthen investment planning cycles and can lead to hubs losing momentum.\u00a0<\/p>\n Perhaps the biggest difference with this round of trade measures is that Singapore has been singled out by the US authorities.<\/p>\n Under Section 301, the US government named Singapore in two investigations. In plain terms, the US is asking two questions: whether production in places like Singapore adds to global oversupply in strategic sectors, and whether trade hubs are doing enough to ensure goods moving through them are free of forced labour. <\/p>\n On Singapore\u2019s role in contributing to global oversupply, the fundamentals are on our side. We do not subsidise excess production to flood export markets. Our manufacturing is high-value, constrained by land and labour, and we run an overall trade deficit with the US.\u00a0<\/p>\n But the optics \u2013 that Singapore is even named in these investigations \u2013 can work against us. We host large concentrations of advanced manufacturing plants in sectors the US considers strategic. Expansions by multinational firms \u2013 even when driven by commercial logic \u2013 can be misread as state-directed capacity building.\u00a0 <\/p>\n Such perceptions matter under Section 301. The statute does not require conclusive proof of wrongdoing \u2013 only a credible claim that US commerce might be harmed.\u00a0<\/p>\n Once perception turns, that uncertainty alone is enough to raise compliance costs and make firms think twice about where to place their next expansion.\u00a0\u00a0<\/p>\n As for forced labour, the allegation is not that Singapore practises it. Forced labour is illegal here and actively policed. The claim is that a trusted trade hub can become a weak link \u2013 a place where tainted goods are laundered through complex supply chains.<\/p>\n An established case will result in more friction for companies: tighter standards, slower clearance, and higher audit and traceability costs. A trading firm shipping components may be asked to trace inputs back several tiers of suppliers. A distributor may face delayed clearance while documentation is reviewed. Insurance and financing costs also rise when shipments are flagged as higher-risk.\u00a0<\/p>\n Each step adds cost, time and uncertainty \u2013 eroding the speed advantage that trade hubs rely on. SMEs will likely feel it first.\u00a0<\/p>\n Singapore\u2019s advantage has always been trust: that goods move efficiently because we have reliable systems. This risk is a strategic one we cannot ignore.\u00a0<\/p>\n The Government has engaged the US Trade Representative (USTR) to clarify the basis and scope of the probes, provide data to counter claims and reaffirm that Singapore does not tolerate unfair trade practices or forced labour. The Singapore Business Federation will also be making representations to reflect how Singapore firms operate and comply.<\/p>\n But there are three things businesses can do to weather the storm.<\/p>\n First, treat compliance resilience as a core capability. Invest in origin tracking and traceability. Set clearer contract terms on tariff risk. Raise baseline standards so compliance is consistent.<\/p>\n This means mapping supply chains beyond first-tier suppliers, investing in traceability systems that can withstand audits, and embedding tariff contingency clauses into long-term contracts. Firms that can demonstrate control and transparency will face fewer disruptions.<\/p>\n Second, diversify markets, especially within ASEAN.\u00a0<\/p>\n Singapore businesses remain highly internationalised. Based on the Singapore Business Federation\u2019s National Business Sentiment survey 2025, about 60 per cent of our businesses have overseas operations. But momentum is moderating<\/span><\/a> as uncertainty increases. Only 47 per cent plan to expand overseas, down from 59 per cent in 2024.\u00a0<\/p>\n This is precisely when firms should resist short-term thinking.\u00a0Diversification is no longer a growth strategy but risk management. It means avoiding single-market exposure so sudden policy shifts in one destination do not dominate cash flow, capacity utilisation and capital allocation decisions.<\/p>\n Third, keep moving up the value chain. Firms that anchor higher-value functions in Singapore \u2013 such as design, process engineering, clinical development or regional decision-making \u2013 are harder to displace because these roles sit at the centre of how products are developed, qualified and scaled, not just where they are assembled.<\/p>\n 2025 has taught us that the real damage of tariffs is cumulative. With uncertainty, investments slow and capabilities erode. We could see fewer new pilot projects or regional mandates, and fewer big players anchoring themselves here.\u00a0<\/p>\n Together, all this determines whether Singapore remains a place firms choose for their next bet, and not their last one.<\/p>\n Kok Ping Soon is chief executive officer of the Singapore Business Federation.<\/p>\n<\/li>\n<\/ul>\n<\/div>\n\n